Year-end Capital Tax planning

Capital gains exemption, inheritance tax

Have you used your 2018/19 £11,700 annual capital gains exemption?  Consider selling shares where the gain is less than £11,700 before 6 April 2019. In addition, if you have any worthless shares, consider a negligible value claim to establish a capital loss. You may even be able to set off that capital loss against your income under certain circumstances which could save income tax of up to 45% of the loss.

As far as Inheritance Tax (IHT) planning is concerned, all individuals have a £3,000 annual allowance which means that gifts up to that amount each year are exempt from IHT. If you have not used your £3,000 allowance from 2017/18 you can make gifts of up to £6,000 before 6 April 2019 without the gift being liable to IHT. Also, consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT. Gifts out of your surplus income are not subject to IHT if properly structured and we can assist you in keeping the necessary documentation.

Why Every Business Should Maintain a Cash Flow Forecast

Saint & Co thank Float,  one of our sponsors at BITE2018 for their support at our successful event last year and for writing this article about cash flow forecasting.

A lack of cash is the number one reason why businesses fail. But it doesn’t have to be that way.

By gaining insight into the inflows and outflows of your cash, you can begin to make more effective strategic decisions.

What cash flow forecasting can do for your business

Regardless of whether your business is just starting out, beginning to grow, or has been in operation for a while, keeping an eye on your cash flow is essential to establishing actionable plans, whatever they may be.

A cash flow forecast can allow you to plan for a rainy day, as well as for your blue sky scenario. Forecasting can show you when and where a cash gap may appear. This forewarning means that you can arm yourself against a cash crisis by tightening up expenses, securing finance or invoicing earlier.

Showing you the reality of your cash position, a cash flow forecast is an invaluable tool for growth, allowing you to know that you will have the right money at the right time. With an accurate forecast you will be able to pinpoint times when you have a surplus of cash that can be reinvested for growth. Furthermore, with scenario planning you can model out the impact of different decisions on your cash. These can include hiring decisions, opening a new location, taking on a new project or can even be used in contingency planning for a ‘worst case’ scenario.

How to forecast your cash

There are two ways to create a cash flow forecast, the direct and the indirect method. The direct method tallies all bills and invoices to give you an operational forecast that is accurate in the short to mid term. The second if the indirect method which derives a cash flow forecast from your profit and loss and your balance sheet, to give you a forecast that is accurate in the long term but cannot provide insight into the short to mid term.

We have created a free template to get you started forecasting your cash using the direct method. Use this method if you’d like to answer questions like ‘Can I afford to make payroll this month’ and ‘What if my biggest invoice is paid late’.

Check it out here!

About Float

Float is a visual and accurate operational cash flow forecasting tool for Xero, Quickbooks Online and FreeAgent. Float updates your forecast with actuals from your accounting software every 24 hours, which means that you always have an up-to-date view of your available cash.

Try Float for free for 14 days!

The Cloud Isn’t Witchcraft!

Xero, cloud accounting

“We don’t save the numbers to our computer. Where do they go? Are they safe? How do they get from my laptop to my phone? Everything’s paperless. I’m telling you, the cloud is witchcraft!”

Just when we thought we’d heard it all… No, the cloud isn’t black magic. But it is more than a little misunderstood. That’s why we wanted to send this blog post to shed some light on what it is, how it works, and why we love it.

What is the cloud?

In the most basic terms, the cloud is essentially a metaphor for the internet.

Back in the early 90s, computer scientists had to find a way to display “the network” in their presentations. The network in question was a group of computers and storage devices (a server-farm), held elsewhere, off-site.

The image they used was that of a cloud, and the name stuck.

How does it work?

Unlike typical computing, where you save data or run programs from your hard drive, cloud computing is all about utilizing the internet. You don’t physically store anything on your own computer; rather, it’s stored elsewhere, held on powerful internet-connected computers spread around the globe.

So long as you have an internet connection, you can log in to an application and access your data quickly and securely.

Why we love the cloud

Here at Saint & Co., we’re passionate advocates for the cloud, and cloud accounting in particular. We encourage our clients to make the switch to Xero and experience the benefit of real-time numbers and instant access to up-to-date accounts, from anywhere, and at any time.

The major advantage of the cloud is that you can access information across a range of internet-connected devices. In the office? Log onto Xero and run a few reports. Out and about meeting clients? Pull up the Xero smartphone app and double check key figures or the status of an invoice before your meeting.

And because the cloud uses powerful remote servers to handle the computing and data storage, you can save money on hardware costs. In days gone by, an in-house desktop accounting system would, at the very least, require a powerful computer to run it. For larger businesses, they often needed their own server (complete with running and maintenance costs).

Thanks to the cloud, you don’t need an expensive machine to use quality accounting software. It does the heavy lifting for you, making the whole approach more affordable than ever before.

Finally, we love the cloud because it makes our lives easier. We can collaborate with you on your accounts, and see what you see, as you see it. We’re not left scrambling for information, or working with out-of-date figures, and that means we can provide you with the very best advice, backed by real numbers.

Switch to the cloud with Saint & Co.

Interested in learning more about the cloud and cloud accounting software? We can show you the ropes – with no broomsticks or cauldrons in sight!

Our accountancy software training service can have you up and running in no time at all.

Contact us today to speak with one of our team members.

VAT Economic Operator and Registration Identification (EORI) Numbers if ‘No Deal’ Brexit

HMRC, import export, intra-EU trade, TSP

If your business currently imports from or exports to the EU, then you may need to consider what will happen to your goods at the border if the UK leaves the EU without a deal.

To move goods into or out of the EU you need an Economic Operator and Registration Identification (EORI) number. If we leave the EU without a deal then all UK traders will need to have an EORI number to allow HMRC to identify the VAT registered organisation and collect duty on goods.

If you already trade with non-EU countries then you should have either a UK EORI number or an EU EORI number. A UK EORI number will be 12 digits and will begin with the prefix GB, whereas EU EORI numbers will begin with a different country prefix, such as IE or FR. If you have a UK EORI number then this will allow you to trade goods with the EU without VAT problems at the border. If you have an EU EORI number HMRC will allow you to use this for a temporary period but will most likely require you to change to a UK EORI.

If you only trade with the EU and therefore don’t have an EORI number you can easily apply to get one. You can apply for an EORI number now, even if you do not use it. It only takes 5 to 10 minutes to apply and it can take up to 3 working days to get your number, so if you are in any doubt about your ability to trade after 29 March 2019, apply now.

Visit www.gov.uk/eori to apply now.

If you need any help registering or are unsure of any of the details you need to have to hand to register contact Saint & Co.

New workplace pension limits from 6 April 2019

workplace pension, limits

The amounts that employers and workers will be required to pay into workplace pensions are due to increase from 6 April unless the worker opts out. The new limits will be 5% from the worker and 3% from the employer. The total minimum contribution will, therefore, increase from the current 5% overall to 8%.

In some schemes, your employer has the option to pay in more than the legal minimum. In these schemes, you can pay in less as long as your employer puts in enough to meet the total minimum contribution of 8%.

Consider Other Tax Efficient Investments

Enterprise Investment Scheme, Capital Gains tax

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS)? These investments in certain qualifying companies allow you to set off of 30% of the amount invested against your income tax bill as well as the ability to defer Capital Gains Tax (CGT) until the shares are sold.

An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available and in addition it is possible to obtain relief against your 2018/19 capital gains. Both EIS and Seed EIS also provide a CGT exemption when the shares themselves are sold after 3 years.  Note however that qualifying EIS and Seed EIS companies tend to be risky investments so professional investment advice should be taken.

A 30% income tax break is also available by investing in a Venture Capital Trust.

 

Buy new equipment before 6 April?

Your business year end, not 5 April, is relevant for capital allowances purposes. If however you are running a business and making up accounts to 31 March or 5 April, you should consider buying plant and machinery to take advantage of the Annual Investment Allowance (AIA).  Note that the AIA was increased from £200,000 to £1 million on 1 January 2019, so the allowance for year ended 31 March 2019 would be £400,000, not the full £1 million (£200,000 x 9/12 plus £1 million x 3/12).

The AIA provides a 100% tax write off for equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new car that emits no more than 50g CO2 per kilometer.

‘No Deal’ Brexit: 3 Important Areas to Consider

Movement of goods, product compliance, March 2019, Transitional Simplified Procedures

With so much uncertainty around what Brexit will mean, planning for a “No Deal” scenario seems sensible right now.

Businesses that buy and sell from the EU should have contingency plans in place which need to be flexible to cope with a variety of possible outcomes.

If a ‘No Deal’ happens after March 2019, here are some of the areas you should consider:

  1. Movement of goods

Customs declarations will need to be made and the UK is implementing a new electronic customs declaration system for businesses, so check if your systems and processes are up to scratch. UK businesses will need a UK Economic Operator Registration and Identification (EORI) number, and you can find the forms on the GOV.UK website, Brexit section: https://www.gov.uk/government/brexit

You may also need an agent to help with import/export declarations as you would for trading outside the EU. Check whether you need additional information from your carrier. Importers can register for Transitional Simplified Procedures (TSP), deferring declarations and paying duty at the border. There is HMRC guidance on the new electronic customs system in the Brexit section on the GOV.UK website (link as above).

An essential exercise for all businesses is Supply Chain Mapping – knowing where inputs come from and what product category they fall into can help assess potential tariffs. For businesses that only export to the EU this will be new and could be time-consuming. Further guidance can be found in the “Trade Topics” section of the World Trade Organization (WTO) website: https://www.wto.org/index.htm.

The EU Tariffs can be found at – http://madb.europa.eu/madb/euTariffs.htm

  1. Product compliance

UK product standards and regulations will be aligned to the EU at the point of exit, however in the event of “No Deal”, UK assessment and certification arrangements could cease to be recognised by the EU. See the Brexit section of the GOV.UK  website for further guidance.

  1. Business contracts and employees

If you have contracts with EU companies these may need to be redrafted to clarify the terms for trade, including VAT changes. If your business employs EU nationals then they should register for settled status. You will need to track the nationality status of employees going forward to ensure compliance with immigration rules and regulations.

Summary

Whether there is a “No Deal”, a brief delay in the UK’s departure and a “deal”, or a longer period of transition, we advise all businesses to research every scenario and “plan for the worst and hope for the best”.

For more information, please read our “No Deal” Brexit Planning Checklist.

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